refer to the diagram for a non-collusive oligopolist. we assume that the firm is initially in equilibrium at point e, where the equilibrium price and quantity are p and q. if the firm's rivals will ignore any price increase but match any price reduction, over what range might marginal cost rise without disturbing equilibrium price and output?

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20-12-2022
Business

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refer to the diagram for a non-collusive oligopolist. we assume that the firm is initially in equilibrium at point e, where the equilibrium price and quantity are p and q. if the firm's rivals will ignore any price increase but match any price reduction, over what range might marginal cost rise without disturbing equilibrium price and output?

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smecloudbird17 smecloudbird17 · Answer 1 · 2022-12-26T18:08:48+01:00

If the firm's rivals will ignore any price increase but match any price reduction, the range over which the marginal cost rise without disturbing equilibrium price and output without disrupting the equilibrium between output and price.

1) The sentence that follows is true:

Demand curve D1 presupposes that the oligopolist's competitors will match any price changes he makes. An oligopoly is a market characterized by a small number of firms who realize they are interdependent in their pricing and output policies. The number of firms is small enough to give each firm some market power.

2) If the company's competitors disregard price increases but match price decreases,

The demand curve will be D2ED1 in this instance, and the MR curve will be MR2abMR1.

Therefore, at the range of ab, the marginal cost increases without disrupting the equilibrium between output and price.

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